Food is the most important thing for the people. in the past, some Chinese people had a special enthusiasm for eating. After that, there are Hong Kong stocks on the tip of the tongue, and delicacies are like clouds in the capital market.Haidilao International Holding, Jiumaojiu and other well-known companies that have landed in Hong Kong stocks have gone out of a unilateral upward trend since their listing, highlighting the preference of domestic and overseas investors for Hong Kong stock catering companies.
On April 15, 2021, Tam Jai International Co. Limited, another fast leisure restaurant chain operator from Hong Kong, submitted a prospectus to the Hong Kong Stock Exchange for listing on the Hong Kong main board. Guotai Junan International is its exclusive sponsor.
According to the prospectus, Wanchai International is the leading and well-known operator of Tam Tsai Yunnan Rice Noodle and Tam Chai Sange Rice Noodle brand fast leisure restaurant chain in Hong Kong with a history of more than 24 years. As of April 7, 2021, there are a total of 148 restaurants under the company's two brands, including 72 Tam Tsai restaurants and 72 Sam GE restaurants covering 18 districts in Hong Kong, Kowloon and the New Territories, 1 Tam Tsai restaurant in Shenzhen, mainland China and 3 San GE restaurants in Singapore.
According to Euromonitor, in terms of revenue in 2019, Tam Tsai International has maintained a competitive position in the market: it ranks first in the field of Asian pasta restaurants with a market share of 58.5%, in fast leisure restaurants with 7.4% market share, and in leisure restaurants with 2.5% market share.
There has never been success for no reason.
The competitive position of the advantage was reflected incisively and vividly in the special year of 2020, when Tan Tsai International handed over a figure showing a 33% increase in net profit. Compared with Haidilao International Holding's net profit last year, which plummeted nearly 86.8% from the same period last year, we not only have to ask, where is the secret that Tam Tsai International's net profit rose instead of falling in 2020? Looking to the future, Tam Tsai International is expanding its international "active pursuit for change". Will it change the current predicament?
The secret of rising net profit instead of falling
The history of 24 years is not long, but it is by no means short enough to affect the taste buds of many Hong Kong people. For them, Tan Tsai International's Yunnan and Sango rice noodles are the most familiar brands. To be able to conquer and accompany the taste of Hong Kong people in such a long time axis, it can be seen that Tan Tsai's rice noodles are not ordinary rice noodles.
According to the prospectus, Tam Tsai International is a chain restaurant operator focusing on rice noodles, and all restaurants are self-operated by two their own brands, namely Tam Tsai and third Brother. Tan Zai and San GE brand rice noodles, which originated from the improved Yunnan Cross Bridge Rice Noodle, have been inspired and integrated by southwestern Chinese cuisine in their development, requiring a mix of dozens of ingredients, including meat, meatballs, vegetables, mushrooms and bean products. In addition, there are 6 kinds of soup base to choose from, and the original spiciness is divided into 10 grades. Its signature soup (such as spicy soup, spicy soup, etc.) and signature dishes (such as bandit chicken wings, etc.) have become customers' favorite delicacies.
With years of development, investment and fine-tuning, Tam Tsai and Sango Rice Noodles have become a new generation of popular delicacies in Hong Kong's food culture.
According to a series of surveys conducted by a well-known market research institution, between the first quarter of 2019 and the fourth quarter of 2020, Tam Tsai and Brother Sam also recorded an increase of 23% and 36% respectively in terms of the brand equity index (the industry's measure of brand awareness). Although the taste and characteristics of the two brands of soup are very different, with the improvement of brand awarenessEach brand has its own followers.
At the same time, in order to manage the large scale of operations and improve operational efficiency, Tam Tsai International has established a highly standardized and scalable business model: from standardized food handling procedures at the restaurant level to developing different types of cooking equipment with cooking equipment suppliers to help kitchen staff control cooking time or ingredients more accurately-and then purchase and produce semi-finished products in the central kitchen. Finally, the semi-finished products will be distributed to each store.
Especially since HK $1.9 billion in 2018 was sold to Toridoll, the parent company of Japanese Wudong brand "pill turtle noodle", Tam Tsai International has accelerated the construction of the supply chain of central kitchen and procurement, greatly increased the cost advantage gained by economies of scale and reduced the overall food processing time and cost, and maintained the confidentiality of soup and sauce recipes by concentrating related cooking work on a team composed of a small number of employees. Moreover, a higher quality and stable supply of food can be obtained at a stable price, while maintaining the consistency of food taste and quality.
It is precisely because of the establishment of a standardized and replicable business model that simplifies food handling procedures at the restaurant level, which does not require high requirements for chefs and is guaranteed to be quickly applied to all restaurants. Even under the disturbance of the epidemic in 2020Tan Tsai International's restaurant performance remains at a stable level.
In the 2019 and 2020 fiscal years ended March 31, the average daily income of each Tam Tsai International restaurant was HK $41314 and HK $40603 respectively, and the total number of customers was 29068 and 28937 respectively. An average of 7.0 bowls and 6.5 bowls are sold per seat per day.
There is no concept without comparison.. Compared with the "king of turning Taiwan" Haidilao International Holding store turnaround rate of 3.5 times per day in 2020, Tam Tsai International is not inferior. In addition, compared with Haidilao International Holding's net profit last year, which plunged nearly 86.8 per cent from a year earlier, Tan Tsai's net profit rose instead of falling.
According to the prospectus, Tam Tsai International achieved income of HK $1.556 billion and HK $1.691 billion respectively in the two financial years to the end of March 2019 and March 2020, maintaining positive growth. In the nine months to the end of December 2019 and the end of December 2020, the company achieved income of HK $1.304 billion and HK $1.298 billion respectively, with a profit of HK $175 million and HK $232 million over the same period, while net profit increased significantly compared with the same period last year.
Something unusual appeared. Although Tan Tsai International's revenue grew by-0.46% year-on-year in the nine months to the end of 2020, its net profit rose significantly by 33%. It is clear that the decline in income deviates from the growth of profits.
As the saying goes, if something goes wrong, there must be a demon.. If we only look at the profit growth rate, Tam Tsai International seems to be so good that it has few friends. While revenue has declined, profits have risen sharply. Is it because the company has greatly improved operational efficiency and thus reduced costs? Or has it realized the "triangular resonance" of the quality, cost and efficiency of the commercial society? After careful analysis, it is found that the secret of the deviation lies in the contribution of non-recurrent projects: Tam Tsai International received government subsidies and rent concessions related to public health events between April and December 2020.
According to the prospectus, rent relief was granted from landlords for the nine months ended December 31, 2020, with an amount of about HK $13 million. Subsidies from the epidemic Prevention Fund have been granted by the governments of Hong Kong and Singapore for the year ended March 31, 2020, the nine months ended December 31, 2020 and the period from January 1, 2021 to the last practicable date, the amounts are about HK $2 million, HK $126 million and HK $30 million respectively.
Excluding income from these two non-recurring items, Tam Tsai International's net profit for the nine months to the end of December 2020 was about HK $95.64 million, down about 45 per cent from a year earlier. It can be seen that the epidemic still has a great impact on Tan Tsai International.
This also echoes a major risk suggested in the prospectus: Tam Tsai International is vulnerable to outbreaks, epidemics or pandemics of infectious or infectious diseases, animal diseases, foodborne diseases, and negative reports related to these events.
Will the market buy 163 in three years?
If you are in difficulty, you will want to change.
The Hong Kong market is the stronghold of Tan Tsai International, with 97% of restaurants. As of April 2020, the company's revenue and profits from Hong Kong also accounted for more than 97%. This shows that Tam Tsai International is deeply dependent on the Hong Kong base. In this context, the disadvantages of the company's single market structure and the ceiling of Hong Kong market growth are also obvious.
The time of dependence is also the time of restraint, and the dilemma begins to emerge.。
The Hong Kong market will grow slowly in the future. According to Euromonitor, the Hong Kong fast leisure restaurant market is forecast to increase from HK $22.9 billion in 2019 at a compound annual growth rate of about 2.1% to HK $25.4 billion in 2024.
Therefore, for the future, Wanchai International, on the one hand, continues to consolidate its advantage in the base camp and plans to open 44 new restaurants, on the other hand, it puts forward a clear strategy to speed up the development of the international market. According to the prospectus, the company plans to open about 44, 55, 24, 25 and 15 new restaurants in Hong Kong, mainland China, Singapore, Japan and Australia respectively by March 31, 2024, all of which are operated by Tam Tsai International. In fiscal year 2022-2024, the company plans to open 45, 55 and 63 stores respectively.
Obviously, the plan to open a store isThe number of new restaurants in the mainland market is the largest and has reached 55, which has become the core increment of change.
Compared with the base base, fast leisure restaurants in mainland China are forecast to increase from US $81.3 billion in 2019 at a compound annual growth rate of 4.9 per cent to US $103.5 billion in 2024, twice the growth rate of the Hong Kong market. In addition, since more than 90% of Hong Kong's vegetables, meat and other products are supplied by the mainland every year, the cost of setting up shop in the mainland is lower. Tam Tsai International estimates that the average initial cost and rental cost of opening a new restaurant in the mainland are only HK $2.9 million and HK $400000 respectively, the lowest of all planned areas.
In addition, the consumer food service industry in mainland China is highly fragmented due to its extensive geographical coverage, and the five leading companies account for less than 3% of consumer food service revenue.
In terms of revenue, fast leisure restaurants in Singapore are expected to increase from a compound annual growth rate of 3.7 per cent in 2019 to $1.4 billion in 2024, also higher than the 2.1 per cent of the Hong Kong market. Japan is also an Asian country, customers are accustomed to pasta as the main meal, but also accept other Chinese-influenced foods and condiments.
It is inevitable for Tan Zai International to seek change, and international expansion is also the road that must be taken. Only 163 in three years correspond to such a large scale of expansion and such a rapid expansion rate, exceeding the scale of only 148 in the 24 years since its establishment.
This is faster than ever before, "Speed and Passion" will be staged.
More importantly, the frenzied expansion in the next three years will also increase the uncertainty of Tan Tsai's international performance. Compared with restaurants in the existing market, restaurants opened in the new market may record lower sales, higher initial opening costs and higher operating costs. Boosting sales of restaurants in new markets may take longer than expected and may not meet expected sales and profits, thus affecting overall profitability.
At the same time, the world will not drop the pie in vain. Expanding to a new market also means greater competition. Take the mainland market as an example, it may face different consumer preferences. As a staple food and as a snack, rice noodles are often eaten by people in several provinces in the south. Breaking into the northern market means more difficult. And Tan Tsai International's rice noodles, which combines the influence of Chinese cuisine in the southwest represented by Yunnan, is now returning to the mainland market, especially competition in the south.Is it possible to dig coal in Northeast China and sell it in Datong, Shanxi Province? Will large-scale expansion of the market really buy it?
Summary
Although investors in Hong Kong stocks prefer catering stocks, it does not necessarily mean that Wanchai International can replicate the sharp performance of Haidilao International Holding and 99 Mao. At the same time of preference, we need to be rational. In the short term, the impact of the epidemic on catering is getting smaller and smaller, but there is also the possibility of repetition.
In the medium and long term, from the point of view of Davis double-click or volume and price rise, the net profit is the average profit per store * the number of stores. Of course, the ideal result is that the profits of individual stores can be maintained or increased under the rapid expansion, but the cost and competitive pressure of new restaurants will in turn drive down Tan Tsai's overall profit margins. For Tan Tsai InternationalWhile pursuing the crazy expansion of "speed and passion", it is necessary to answer the test of how to ensure stable and high-quality food prices and services and how to use the supply chain to improve operational efficiency in the future.